Bid data: Providers go behind the numbers


Ever since Prof. Peter Cramton came out with an analysis of Medicare data that showed a 60% to 80% drop in the number of claims for HME in Round 1 competitive bidding areas, I've been wondering: How is that possible? I mean, 80%?!?!

It turns out it is possible, and there are a myriad of reasons why, the least of which is—ahem, CMS— a reduction in fraud and abuse. If you want proof that competitive bidding has made a mess of the DME benefit, read on.

Unsolicited, several providers emailed me reasons why they think the number of claims have fallen off a cliff in bid areas.

One provider emailed me these reasons:

  • Contracted suppliers not able to get documentation/CMNs/written orders are delivering items but not submitting claims. This would be because the incumbent DME supplier had a good relationship with "the person" that got all the documentation before and the contracted suppliers have no relationship with the referring physician's office.
  • Suppliers aren't "making" orders "happen." Example: A contracted supplier gets an order for a PWC but all the required elements are not present. The contracted supplier employs fewer "sales" staff than before (getting paid less, someone had to go) so rather than sending a person to the doc's office, they send a fax or make a call. The doc's office sends some more stuff over but not enough to qualify the patient. The contracted supplier's business is up 30% (in units) so they do not chase orders as hard and the beneficiary never gets the PWC.
  • Referral sources have long wait times and are either not ordering products or suggesting patients "find it on their own." For example, a doc used to "arrange" orders for oxygen by calling the DME provider, getting saturations over to the DME provider, etc. But the two DME providers they used to use are not contracted. So now the doc hands the beneficiary a 4"x4" script and tells them to go to and find a supplier. Which never happens.

Another provider, John Reed, formerly of Pro2 Respiratory and now of Central Ohio Specialty Care, emailed me these reasons:

  • Claims for the period Jan. 1, 2011, through Sept. 30, 2011, for any "contract winner" who was being acquired by another company like Lincare or Apria among many others would have been "held and not submitted" until CMS approved novation agreements around the conditions of acquisition. These acquisitions were taking as long as 12 months for CMS to review and approve. Lincare reported in its second quarter, 2011, release that it had acquired companies in eight of nine Round 1 markets and were still awaiting approval of those agreements as of June 30, 2011.  A conspiracy theorist might even suggest that the novation agreement timeline was deliberately lengthened to allow for such claims reduction totals.
  • A large number of "contract losers" (if not every non-contract supplier) continued to take on new Medicare referrals believing that the unbiased work of 244 economists would support an eventual repeal or delay.  This condition occurred well into 2011, possibly through the entire nine-month period analyzed by Dr. Cramton.  The suppliers would "delay" requesting Medicare CMN forms from physicians and delay billing until the repeal occurred.
  • A large amount of subcontract activity delayed the traditional revenue cycle for processing these claims. Managing execution was weak in many areas as non-contract suppliers or out-of-area contract winners struggled to efficiently establish and manage the fundamental subcontractor arrangement.
  • Contract suppliers, especially out of area, were actively seeking a buyer, while developing subcontractor agreements, thus multiplying the effects above.
  • The number of patients shifting from traditional to Medicare Advantage plans continues to grow. Cincinnati, for example, has about 30% of Medicare beneficiaries in managed Medicare plans that were unaffected by Round 1 rules.  In late 2010, many companies actively worked to protect their affected patient bases by helping patients about to be impacted by Round 1 into Managed Medicare plans not controlled by the Round 1 rules.
  • Anytime a beneficiary changed suppliers, a physician was required to complete a new CMN, resulting in a flood of hitting their offices. The combination of delays due to acquisitions as described above, due to transfers of service, or due to new services from suppliers otherwise unknown in a Round 1 area, subsequently caused delays in processed claims to the Medicare program. These will eventually be gathered and submitted prior to Dec. 31, 2012, by the supplier.

So there you have it. It's much more complicated than you or I or, most importantly, CMS expected.

But I guess, as far as CMS is concerned, it's much easier to explain everything away under the veil of fraud and abuse.

Liz Beaulieu